Germany’s Schaeuble Floats Bank-Resolution Plan in Negotiations

Patrick Donahue and Birgit Jennen

October 30, 2013 — 12:29 PM EDT

German Finance Minister Wolfgang Schaeuble floated a European bank-resolution plan involving mutual lending assistance between national funds as part of coalition talks, Social Democrat Martin Schulz said.

As negotiators from Chancellor Angela Merkel’s bloc and the SPD met today to overcome differences on European policy, Schaeuble proposed a way to finance failing banks that entailed a network of member states’ funds, Schulz said. Herbert Reul, the lead negotiator from Merkel’s Christian Democrats, said the factions are seeking a compromise by the time European Union finance ministers meet on Nov. 15.

“We want to find a pragmatic solution,” Schulz, the president of the European Parliament who is also the SPD’s chief negotiator on European affairs, said after talks in Berlin. He said his party would consider the proposal. German Finance Ministry spokesman Martin Kotthaus declined to comment on the negotiations.

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Merkel’s bloc and Germany’s SPD met for the second full round of coalition talks as the main rival parties stitch together their first agreements to form a new government more than five weeks after the election. An accord on financing a bank-resolution fund could mark a breakthrough for a European banking union, a central project among European leaders to overcome the region’s four-year-old debt crisis.

The 75 negotiators from Merkel’s CDU, its CSU Bavarian sister party and the SPD confirmed an agreement earlier this week to renew a push for a broad-based European financial-transaction tax. They spent more time than anticipated debating a European bank resolution, Reul said.

Funding Clash

All parties want banks to finance any resolution fund, a mechanism that could take years to establish. The factions clashed on how to finance a resolution mechanism in the interim amid resistance to use of taxpayer money.

“We don’t want any loophole that would allow banks to tap tax money,” Markus Soeder, the lead CSU negotiator and Bavarian finance minister, told reporters after the meeting.

A unified resolution mechanism is part of a euro-area effort to break the link between sovereigns and banks by centralizing oversight and crisis management of failing lenders. The blueprint, presented in July by Michel Barnier, the EU’s financial services chief, has met with a barrage of complaints from governments.

Still, EU leaders reaffirmed last week that nations should agree a common stance on the plans by the end of this year. Germany already earlier this year circulated a blueprint for the bank resolution plan, involving a network of national authorities, though no common fund.

Debt Redemption

Schulz also confirmed that Merkel’s faction refused to consider a European debt-redemption fund.

Other issues on which the parties disagree, such as the SPD’s demand to establish a nationwide minimum wage, have not yet been broached in talks that will stretch through November.

After that, the SPD must put a coalition agreement to a vote of the party’s 470,000 members. SPD Chairman Sigmar Gabriel won the endorsement by a party delegation to enter talks with a list of 10 “essential” Social Democratic conditions to join a government with Merkel, who oversaw a “grand coalition” with the SPD from 2005 to 2009.

CDU and SPD officials say they hope the coalition can be sworn in before Christmas.